Young, Colleagues Release Report Showing Non-Compete Agreements Restrict Job Mobility, Stifle Economic Growth
WASHINGTON – U.S. Senators Todd Young (R-Ind.), Chris Murphy (D-Conn.), Marco Rubio (R-Fla.), Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), and Tim Kaine (D-Va.) released a new report by the U.S. Government Accountability Office (GAO) which found the use of non-compete agreements (NCAs) is widespread throughout the U.S. labor market and restricts job mobility, lowers wages for workers, and discourages innovation.
In 2019, the Senators requested a nonpartisan GAO investigation into the prevalence and effects of NCAs on workers and the economy as awhole. Their letter cited concernsabout the spread of these agreements from highly technical fields into lower wage work, and the impact they could have on entrepreneurship and innovation, economic and wage growth, and productivity and competition in labor markets.
GAO reviewed existing studies, surveyed 446 private sector employers, and conducted a separate survey of 25 state attorney general offices on state statutes related to NCAs. GAO also interviewed stakeholders, such as worker advocates, employer groups, and researchers, and reviewed relevant federal laws.
In its report, GAO estimated that 18% of workers were subject to NCAs at the time the study was conducted,and 38% of workers have been subject to an NCA at some point in their career.Over half of the 446 private sector employers responding to GAO’s survey reported that at least some of their workers had NCAs. While many employers report using NCAs to protect their business interests, including trade secrets and client lists, GAO found that the use of NCAs is not limited to executives, but rather extends to hourly and low-wage workers who are unlikely to have access to the types of confidential information employers seek to protect.
GAO found that workers’ job mobility is reduced in states that are more likely to enforce NCAs, while state bans on NCAs for certain workers increased workers’ wages, on average. The studies reviewed by GAO also showed that enforcement of NCAs may restrain the creation of new businesses, especially in the tech and science industries, because of increased probability of litigation and greater costs of recruiting and hiring staff.
“This Government Accountability Office report confirms what we have long known: the vast majority of non-compete agreements restrict job mobility and stifle economic growth,” said Senator Young. “Congress should pass our bipartisan Workforce Mobility Act to rein in the use of non-competes. The reforms in our bill will assist workers and entrepreneurs so they can freely apply their talents where their skills are in greatest demand, making our economy more dynamic.”
“The GAO’s report confirms what workers, advocates, and entrepreneurs have said for a long time: non-compete agreements depress wages and stave off competition. It’s a bad deal for low- and high-income workers, but it’s also a bad deal for our economy at a time when we should be encouraging more innovation, not less. This report makes clear that it’s time for Congress to pass legislation to protect workers and encourage more economic development,” said Senator Murphy.
A one-pager on GAO’s findings is available here. The full GAO report is available here.
Background:
In February 2023, Senators Young and Murphy reintroduced the Workforce Mobility Act, bipartisan legislation to limit the use of non-compete agreements that negatively impact American workers. Young and Murphy also released this statement on the Federal Trade Commission’s proposed rule limiting employers’ use of non-compete agreements for their employees in January 2023.